Response to Abbey National

Lloyds TSB Group PLC
13 December 2000

       
Not for release, publication or distribution in or into the United States,
Canada, Australia or Japan
FOR IMMEDIATE RELEASE                         

DETAILS OF LLOYDS TSB GROUP PLC'S ('LLOYDS TSB') PROPOSAL TO ABBEY NATIONAL
PLC ('ABBEY NATIONAL')

Lloyds TSB is disappointed that Abbey National has rejected its proposal
without choosing to discuss the proposal with Lloyds TSB.  The issues Abbey
National raised were shareholder value, synergy deliverability and regulatory
risk.  In reaction to these issues, Lloyds TSB is convinced that:

* The value created for Abbey National shareholders by Lloyds TSB's proposal
would be significantly greater than that available from either a merger of
Abbey National and Bank of Scotland or Abbey National remaining independent,
and represents full value for Abbey National.  Significant value would be
created for Lloyds TSB shareholders.

* Lloyds TSB has a proven track record in delivering synergies from the merger
between Lloyds Bank and TSB and from other transactions.

* The markets in which Lloyds TSB and Abbey National operate are very
competitive and Lloyds TSB would put a submission to the competition
authorities for their consideration at the appropriate time.  

Abbey National reportedly has been prepared to consider a nil-premium merger
with Bank of Scotland, yet regards a 40 per cent. premium from Lloyds TSB as
unacceptable.  Similarly, despite Lloyds TSB's proven track record in merger
integration and in meeting synergy promises, Abbey National has queried its
ability to deliver.  Neither Abbey National nor Bank of Scotland has ever
undertaken an integration on anything like the scale they are considering.  

Lloyds TSB will now consider the reaction of shareholders to the position
adopted by Abbey National's Board and any announcement by Abbey National
relating to Bank of Scotland.  Accordingly, Lloyds TSB continues to keep its
options open.  
                                                                              

Lloyds TSB's proposal for a transaction with Abbey National was made to the
Board of Abbey National in a letter dated 11 December 2000.  The key points of
the proposal were as follows:

* Abbey National shareholders would be offered 1.5 Lloyds TSB shares plus 260
pence in cash per Abbey National share.  Following the transaction, Abbey
National shareholders would hold 28 per cent. of the shares of the enlarged
company and would receive £3.8 billion in cash on a fully diluted basis.

* On the basis of the Lloyds TSB closing price of 718p on 2 November 2000 (the
day before Abbey National announced it had approached Bank of Scotland
regarding a possible acquisition, since when the share prices of both Lloyds
TSB and Abbey National have been affected by speculation about a transaction),
the proposal values each Abbey National share at 1,337p.  This represents a
premium of 38 per cent. over the 2 November 2000 closing price of Abbey
National shares of 969p.  On the basis of the average closing prices for
Lloyds TSB and Abbey National for the one month period prior to 3 November
2000, Lloyds TSB's proposal would represent a premium of 40 per cent.  

* Abbey National shareholders would own approximately 28 per cent. of the
combined group and would therefore benefit additionally from the substantial
synergies that would be generated as a result of the transaction.

* The combination of Lloyds TSB and Abbey National would enable Lloyds TSB to
create substantial value for both sets of shareholders.  Lloyds TSB has
identified substantial cost savings, the majority to come from integrating
processing, administrative and back office operations.  In addition, Lloyds
TSB has identified significant revenue enhancements, which it believes to be
at least equivalent to those which a combination between Abbey National and
Bank of Scotland may generate.  Experience suggests that discussions with
Abbey National might lead to the identification of further synergies.  

* Lloyds TSB estimates that the combination of Lloyds TSB and Abbey National
would lead to earnings accretion (before goodwill amortisation and
implementation costs) for Lloyds TSB shareholders in the second year after
completion of the transaction.*

Lloyds TSB's performance since the merger of Lloyds Bank and TSB in 1995
demonstrates its ability to add substantial value through in-market
consolidation.  Between 1995 and 1999 Lloyds TSB reduced its expense base by
over £400 million and its efficiency ratio improved from 60 per cent. to 43
per cent.  This strong cost management combined with 6 per cent. compound
annual growth in revenue have been the main contributors to the delivery of 30
per cent. compound annual growth in economic profit over the same period.

The transaction would be consistent with Lloyds TSB's intention to participate
in UK consolidation and in line with the Lloyds TSB strategy of creating real
value for shareholders and customers by advancing our stated aims of being a
leader in our chosen markets, being first choice for our customers and driving
down day to day operating costs to support further investment for growth.  The
combination of Lloyds TSB and Abbey National would greatly enhance
productivity and the ability to deliver value to shareholders and customers.

Lloyds TSB also believes the proposal is consistent with its intention to
pursue international opportunities, as the combination of the two companies
would create a stronger platform.

Other key points include:

* Abbey National personal customers who currently use Abbey National's 722
branches would also be able to use more than 2,200 Lloyds TSB branches.  

* Lloyds TSB intends to retain the Abbey National brand and would maintain
Abbey National's presence on the high street, with no Abbey National branch
closures as a result of the merger, for at least two years.

* Following the transaction, Lloyds TSB would extend its stated commitment not
to close the last branch in town to Abbey National branches and intends to
extend its agency agreement with the Post Office to include Abbey National
customers.

* It is envisaged that, although the merger would result in a reduction in the
number of employees of the combined group, this would be achieved mainly
through normal staff turnover and with minimal compulsory redundancies, as was
Lloyds TSB's experience following the merger of Lloyds Bank and TSB.  Normal
staff turnover of Lloyds TSB is currently approximately 9 per cent. per annum.

* Lloyds TSB is already the largest corporate giver in the UK.  Since the
merger of Lloyds Bank and TSB, the Lloyds TSB Foundations have received £99
million, including £31 million in the year 2000, to distribute to charities. 
Based on present levels of profits, the merger would lead to the Foundations
receiving an additional £15 million per annum.


Enquiries

Lloyds TSB Group plc       Investor Relations
                            Kent Atkinson         020 7356 1436
                            Group Finance Director
                            E-mail: [e-mail]
       

                            Michael Oliver        020 7356 2167
                            Director of Investor Relations
                            E-mail: [e-mail]

Media
                            Terrence Collis       020 7356 2078
                            Director of Group Corporate Communications
                            E-mail: [e-mail]

Financial advisers:

J.P. Morgan                 Terry Eccles          020 7325 4169

Merrill Lynch               Matthew Greenburgh    020 7573 1410


Corporate brokers:

Hoare Govett                Peter Meinertzhagen   020 7678 8000

Schroder Salomon            Atholl Turrell        020 7986 1283
Smith Barney       


Merrill Lynch International and J.P. Morgan Securities Ltd., which are
regulated in the United Kingdom by The Securities and Futures Authority
Limited, are acting for Lloyds TSB and no-one else in connection with the
possible transaction described in this announcement and will not be
responsible to anyone other than Lloyds TSB for providing the protections
afforded to the customers of Merrill Lynch International and J.P. Morgan
Securities Ltd., nor for giving advice in relation to such possible
transaction.

This announcement does not constitute an offer or an intention to make an
offer for Abbey National or create any obligation or commitment on Lloyds TSB
and should not be interpreted as constituting evidence of a decision whether
or not to make an offer.

* The statement relating to earnings accretion should not be interpreted to
mean that the earnings per share of Lloyds TSB for the current or future
financial years will necessarily match or exceed the historical published
earnings per share of Lloyds TSB.


Bases And Sources Of Information

1. Unless otherwise stated, financial and other information concerning Lloyds
TSB and Abbey National has been extracted or derived from interim statements,
preliminary results and the annual reports and accounts of each company for
the relevant periods, or from other published sources or from Lloyds TSB
management sources.
2. References to historic share price performance have been extracted from
Datastream or the Daily Official List.
3. The statement (i) that Abbey National customers have access to 722 Abbey
National branches is derived from Abbey National's interim results for the six
months ended 30 June 2000; and (ii) that they would have access to more than
2,200 Lloyds TSB branches is derived from Lloyds TSB management sources.
4. The statement that Lloyds TSB is already the largest corporate giver in the
UK is derived from Smythe, J., and Casson, D., 'The Guide to UK Company Giving
- 1999 Edition'.
5. The statement that, based on present levels of profits, the merger would
lead to an additional £15 million per annum in contributions to charity is
based on Abbey National's reported profits before tax and extraordinary items
as derived from Abbey National's annual report and accounts for the years
ended 31 December 1997, 1998 and 1999 and assumes a contribution rate of 1%
which is equivalent to that at which Lloyds TSB currently contributes.